A Texas district judge ruled Wednesday that legislation that includes lower rate of return assumptions affecting the $4.2 billion Houston Firefighters' Relief and Retirement Fund is unconstitutional.
Harris County Judge Beau Harris ruled in favor of the pension fund in its lawsuit against the city of Houston and officials including Mayor Sylvester Turner, saying its board has "exclusive authority to select an actuary and determine sound actuarial assumptions," according to the court filing.
The pension fund originally filed the lawsuit in July 2019 following a decision the previous month by the Texas Court of Appeals on a prior lawsuit filed by the fund making similar allegations. That decision affirmed a district court ruling that sided with the city in its use of its own actuarial assumptions to determine how much it should contribute to the fund.
While the fund's board of trustees assumed a 7.25% rate of return for its actuarial valuation report in May 2017, the City Council subsequently passed a budget that used the Senate bill's assumed 7% rate of return, a discrepancy that caused the fund to sue the city, Mr. Turner and other city officials.
Following the decision by the appeals court, the pension fund filed a lawsuit on July 26, 2019, because "the court of appeals suggested that a constitutional challenge would be valid if the fund alleged that (the legislation) resulted in the use of actuarial assumptions other than those chosen by the board," according to the original court filing of that lawsuit.
In a statement emailed by his spokeswoman Mary Benton, Mr. Turner said: "The first lawsuit failed, and ultimately this one will as well. The (board) has convinced a state court judge that (its) powers exceed that of the state of Texas and that the firefighters are above any law and cannot be governed by anyone else, even the Texas Legislature. Pension reform has reduced the city of Houston's obligation from $8.2 billion to $4.07 billion. If the court's decision stands, the consequence is the destruction of pension reform with devastating financial impacts for taxpayers, city employees, and the city. The city will appeal."
Dolly De La Cruz, the pension fund's director of member services, could not be immediately reached for comment.